I didn't amoritize my business startup cost.

I bought business in 2016.

I didn't know that I could amoritize and take deduction on cost of buying the business.

in 2019, I sold that business for little more than what i paid for three years ago.

However, I'm getting paid monthly spread over the next 3 years. (Owner's financing)

Can I still deduct what I paid to buy the business, before I pay taxes on the payments I am receiving?

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1 Best answer

Expert Alumni

Mar 18, 2020 6:38:05 AM

No. Generally, startup expenses, such as organizational costs, can be either amortized or you can deduct the full cost in the year you open.

You can amend your 2016, 2017 and 2018 income tax returns. Keep in mind: You have 3 years from the date you filed your return or 2 years after you paid the tax due (whichever is later) to file an amendment.

In TurboTax, there is separate entry for Start Up Costs in the Business Expenses section.

Once general information and self-employment income is reported, you will arrive at the business expenses section.
Select Start up costs - you will be asked to enter your total startup cost, and the date incurred (which should be before you started your business).
Then, the program will ask you how much you'd like to deduct; the rest is automatically amortized for you.

You can elect to deduct up to $5,000 of start-up costs and amortize the remainder over 180 months, beginning with the tax year the business begins.

The deduction of $5000 will be listed as “other expenses”, whereas the amortization will be reported as your depreciation.